Sony aims high, but may miss console's target

The center of the video game universe may be leaving Foster City this fall.

It's not that Sony Computer Entertainment of America, the maker of the country's hottest video game consoles, is moving out. It's that Sony's PlayStation 3, due out in November, may not dominate the way its predecessor, PlayStation 2, has held the market for the past several years.

PlayStation 3's anticipated high price tag, rival Microsoft's year-long headstart with its Xbox 360 (out since November) and brightening prospects for Nintendo's forthcoming Wii console -- could bump the company from its long-held throne.

Pricey, pricey

Parent company Sony, based in Japan, has said it will introduce the PlayStation 3 at $500 for the bare-bones machine and $600 for a box with a bigger hard drive -- twice the price of the PlayStation 2 when it was released in 2000. Both versions will include a Blu-Ray high definition DVD player and a powerful new computer chip.

Microsoft's Xbox 360 costs about $200 less, albeit without the cutting-edge DVD player. Nintendo, which, like Sony, plans to release its new console this fall, is expected to charge $250 or less for the Wii (pronounced We).

"A year ago, the bets were clearly on Sony because they do such a good job in consumer products," said Mark Friedler, CEO of San Francisco-based news site GameDaily, acquired this month by AOL. "However Microsoft has executed better than expected, selling 5 million Xbox 360s. Add to that Nintendo has come out with a new thing, the Wii, which is going to be really cool because it's aimed at non-gamers."

Critics have raved about the user-friendly Wii since Nintendo showed it off at E3, the industry's key trade show, in May. By design, it lacks the high-powered (and expensive) graphics capabilities of Sony and Microsoft's machines. But its new motion-sensing controller has drawn raves. To hit a tennis ball, a player swings the console like a racket; to drive a truck over craggy moutains, a player turns it like a steering wheel.

Greg Kasavin, executive editor of CNET's GameSpot, said, "The Wii stood out as the single most exciting and remarkable new product at E3 2006."

But as the competition enjoyed accolades, Sony suffered disappointing reviews. Electronic Gaming Monthly, for example, gave Playstation 3 the lowest grade of the three "next generation" consoles at E3, based on pricing, demonstration of games and overall showing, said Shane Bettenhausen, Electronic Gaming Monthly's previews editor.

Critics descend

Though Sony executives did not make themselves available for comment after repeated requests, many have been widely seared in the online gaming press for their cocky responses to industry criticism.

In one of the more mild comments, Sony CEO Howard Stringer assured gamers that their $600 was "paying for potential." Other Sony execs have said the machine's potential makes it well worth its higher price. Indeed, the game system offers the possibility to play more expansive games, with crisper, more detailed graphics and more full-motion HD video.

And because its Blu-ray drive allows it to double as a high-definition movie player, its otherwise hefty $600 price tag is a bargain compared with stand-alone Blu-ray DVD players, which generally start at $1,000.

But, as GameDaily's Friedler said, "The conventional wisdom is that it's really about the games, not about the console per se."

That means popular games, particularly ones sold exclusively for the PlayStation 3, drive sales more than the machine's own bells and whistles. Developers have to spend two to four times as much money to make a game for the PlayStation 3 as for the PlayStation 2 because it requires so much more artistic detail including additional characters and landscape textures.

According to Bettenhausen, Sony has announced relatively few games to be released with the console's launch, and almost none are exclusive to PlayStation 3. Ubisoft, which has its North American headquarters in San Francisco, was one exception with its "Assasin's Creed," coming out with the PlayStation 3 (though Microsoft is expected to announce that a new Xbox 360 version will also be released soon).

"The PS3 is complex to develop for, but our developers realize the potential of the machine and are excited about what they're going to be able to do," said Ubisoft spokeswoman Jaime Borasi.

Still, Friedler said the complexity and expense could lead risk-averse game makers to produce sure-fire sequel games such as "Madden NFL" rather than innovative titles for the new console.

Questionable strategy

David Cole, president at market research firm DFC Intelligence, said Sony's choices show it is clearly going after what he calls the high-end power user rather than the mass market its previous game systems appealed to.

"It is almost as if Coca-Cola not only decided to go with a new formula, but also decided to exit the low-brow soft-drink business to go into high-end wines," he said, adding that the elite market is much smaller than the "blue collar" market. "Wal-mart sells more toys than FAO Schwartz and McDonald's sells more beef than Ruth's Chris Steak House."

Perhaps Sony just needs to fine tune its publicity and better articulate its strategy before the console's launch.

As Sony Computer Entertainment of America CEO Kazuo Hirai told the Business Times earlier this year, his yardstick of success for his 685-employee unit is that "One out of every three households in the U.S. has a PlayStation product. When we first started, we had a hard time getting across what a PlayStation was."